The Church of England is to retain its £9 million investment in Rupert
Murdoch’s media empire in the hope that the share price will rise again if
all his British newspapers are sold or closed.

The Church Commissioners, who manage the Church of England’s £5.3 billion investments portfolio, owns shares in both News Corp and BSkyB.

They have come under pressure from senior Anglicans to pull out of Murdoch-owned companies in the wake of the phone hacking scandal on the grounds that continuing to invest is unethical and “embarrassing”.

Andreas Whittam Smith, the first church estates commissioner, acknowledged that the issue posed a “ticklish” dilemma for the investment fund.

But he suggested that selling the Church’s £3.8 million of shares in News Corp and £5.3 million invested in BSkyB, which is part-owned by Mr Murdoch, could waste an opportunity to make money.

He told the Church’s national assembly, the General Synod, in York:

“A premature sale of News Corp and BSkyB might just be simply very bad timing.

“I don't argue with anything that anybody is saying about them but I think it must be possible that News Corp will get rid of its entire British holdings of newspapers.

“If it is to do so, first of all the problem would have vanished from the point of view of the parent company, and for us as investors, and the shares will certainly bounce up again. So it is a ticklish area.”

The Church’s ethical investment advisory group wrote to Mr Murdoch last week demanding that his senior executives - such as Rebekah Brooks, the chief executive of News International - should be held to account for “gross failures in management” at the News of the World.

The Sunday tabloid was closed last week after disclosures that it had been involved in hacking the mobile phone voicemail of the murdered schoolgirl, Milly Dowler.

Mr Whittam Smith, a former Daily Telegraph City editor and founding editor of The Independent newspaper, said he wished the Church’s ethical investment officers the “best of luck” in their discussions with News Corp about the scandal.

“I do wish them the best of luck in talking to Rupert Murdoch, James Murdoch and Rebekah whatsit,” he said. “It won't be easy, and I do not volunteer to be part of the team.”